TIDMARBB TIDMSTB
RNS Number : 5676T
Arbuthnot Banking Group PLC
21 July 2015
ARBUTHNOT BANKING GROUP ("Arbuthnot", "the Group" or "ABG")
Results for the six months to 30 June 2015
"Profitable Growth"
Arbuthnot Banking Group is pleased to announce a half yearly
profit before tax of GBP15.7m, an increase of 65% compared to the
same period last year.
Both banks have continued to grow well and invest for the
future.
Arbuthnot Banking Group PLC is the holding company for Arbuthnot
Latham & Co., Limited and Secure Trust Bank PLC.
FINANCIAL HIGHLIGHTS
-- Profit before tax an increase of 65% to GBP15.7m (H1 2014: GBP9.5m)
-- Underlying profit before tax an increase of 30% to GBP17.1m (H1 2014: GBP13.2m)
-- Customer loans GBP1.4bn (H1 2014: GBP842m)
-- Customer deposits GBP1.6bn (H1 2014: GBP1.1bn)
-- Interim dividend per share 12p (H1 2014: 11p)
OPERATIONAL HIGHLIGHTS
Private Banking - Arbuthnot Latham
-- Profit before tax an increase of 111% to GBP3.7m (H1 2014: GBP1.7m)
-- Customer loans GBP584m (H1 2014: GBP394m)
-- Customer deposits GBP770m (H1 2014: GBP589m)
-- Assets Under Management GBP701m (H1 2014: GBP566m)
Retail Banking - Secure Trust Bank
-- Profit before tax an increase of 40% to GBP16.1m (H1 2014: GBP11.5m)
-- Customer loans GBP852m (H1 2014: GBP448m)
-- Customer deposits GBP835m (H1 2014: GBP477m)
Commenting on the results, Sir Henry Angest, Chairman and Chief
Executive of Arbuthnot, said: "The Group has continued its
profitable growth and as a result the Board has decided to increase
the interim dividend. Both banks have detected an improvement in
customer sentiment following the decisive result of the general
election."
The interim results and presentation are available at
http://www.arbuthnotgroup.com.
Secure Trust Bank PLC is today releasing its interim statement
and it should be read in conjunction with these results.
Footnote - Underlying Profit before tax, adjusted for Secure
Trust Bank share option scheme costs of GBP0.3m and acquisition
accounting adjustments of GBP1m and Arbuthnot Latham transformation
project costs of GBP0.2m.
ENQUIRIES:
Arbuthnot Banking Group 020 7012 2400
Sir Henry Angest, Chairman and Chief Executive
Andrew Salmon, Group Chief Operating Officer
James Cobb, Group Finance Director
David Marshall, Director of Communications
Canaccord Genuity Ltd (Nominated Advisor) 020 7665 4500
Sunil Duggal
Philippa Underwood
Numis Securities Ltd (Broker) 020 7260 1000
Chris Wilkinson
Mark Lander
Bell Pottinger (Financial PR) 020 3772 2563
Ben Woodford
Zoe Pocock
Chairman's Statement
Arbuthnot Banking Group PLC
I am pleased to report that Arbuthnot Banking Group has
continued its profitable growth throughout the first half of 2015.
The Group has recorded a profit before tax of GBP15.7m (H1 2014:
GBP9.5m), which is an increase of 65% compared to the same period
last year. Customer loan balances continue to grow and now stand at
GBP1.4bn and customer deposits have exceeded GBP1.5bn for the first
time.
As a result of the growth in profits the Board has decided to
increase the interim dividend by 1p to 12p which will be paid on 2
October 2015 to shareholders on the register at 4 September
2015.
Private banking subsidiary - Arbuthnot Latham & Co.,
Limited
Arbuthnot Latham has reported a profit before tax for the half
year of GBP3.7m (H1 2014: GBP1.7m), an increase of nearly 111%.
This is a result of the bank's investment by hiring additional
private bankers over the past two years, which has now led to a
substantial increase in new clients opening accounts.
In addition to recruitment in London, the bank has also
developed in its other markets. The South West regional office in
Exeter has agreed a lease and will move into its new offices in the
second half of 2015. The North West regional office in Manchester
has completed further recruitment of both private bankers and a
wealth planner. The Dubai office will break even in July 2015, as
expected, just two years after opening for business.
The bank has shown good growth, with customer loans increasing
to GBP584m (H1 2014: GBP394m), deposits up by 31% to GBP770m (H1
2014: GBP589m) and assets under management growing to GBP701m (H1
2014: GBP566m).
Included in customer loans is GBP101m of the residential
mortgage portfolio that was purchased in December 2014. As planned
at the time of acquisition, the bank successfully transferred
ownership of the loans into its own name in June and at the same
time entered into a servicing agreement with Exact Mortgages.
As the momentum within the business has grown, the bank has
embarked on three significant investment initiatives to support its
future growth. Firstly, the bank has begun a transformational
upgrade of its operations. The programme includes paperless
workflow, standardised customer interaction and the implementation
of a new banking platform. The work is expected to be completed by
the end of 2016. Secondly, Arbuthnot Latham has agreed heads of
terms to secure 10,000 square feet of additional office space in
the City on a short term lease to be occupied in the second half of
2015. Finally, the bank is embarking on its expansion into
Commercial Banking. Initially, the focus will be on providing
business banking services to its entrepreneurial private banking
clients. Recruitment for the new business stream is already
underway with several new bankers expected to join in the remaining
months of 2015. This proposition is not expected to launch until
2016.
Retail banking subsidiary - Secure Trust Bank PLC
The retail bank has reported a record level of first half
profits at GBP16.1m (H1 2014: GBP11.5m), which represents an
increase of 40% on the prior year.
The business has continued to implement its strategic plan
following the significant capital raising it carried out in 2014.
As a result it has seen continued positive trends in its customer
lending balances, which overall have grown by 90% compared to the
prior year period to stand at GBP852m (H1 2014: GBP448m).
Of the more established Consumer Finance businesses, Motor
Finance and Retail Finance have performed well. The Motor Finance
book has increased to GBP152m from GBP128m a year ago, an increase
of 19%. The Retail Finance lending has grown to GBP163m from GBP91m
driven by good lending volumes generated from the sport and leisure
and cycle businesses.
The SME Lending growth has exceeded expectations, largely due to
the Real Estate and Asset Finance products. The Real Estate Finance
loan balances have increased to GBP266m from GBP13m at 30 June
2014, which was shortly after we had started this line of business.
The Asset Finance portfolio has risen to GBP30m and invoice finance
now stands at GBP16m, both of which commenced business within the
last year and are now fully established.
The growth in the portfolios continues to be controlled
according to our strict lending criteria, with impairments at
levels well below our expectations at the time the loans were
originated.
Secure Trust Bank remains funded from the retail deposit
markets. During the first six months of 2015 the bank continued to
see a good flow of deposits and has grown the customer deposit
balances to GBP835m (H1 2014: GBP 477m), an increase of 75%.
Outlook
The economic environment remains favourable, which should allow
both banks to continue their growth. With a business friendly
government in office for the next five years, we expect the banks
will maintain their momentum and continue their long term
investment plans. As ever, we remain vigilant as to the political
and economic events that are developing in Europe, and
elsewhere.
Consolidated Statement of Comprehensive Income
Six Six
months months
ended ended
30 June 30 June
2015 2014
Note GBP000 GBP000
-------------------------------------------- ----- --------- ---------
Interest income 77,374 50,909
Interest expense (12,925) (9,844)
-------------------------------------------- ----- --------- ---------
Net interest income 64,449 41,065
-------------------------------------------- ----- --------- ---------
Fee and commission income 16,373 18,240
Fee and commission expense (1,815) (2,123)
-------------------------------------------- ----- --------- ---------
Net fee and commission income 14,558 16,117
-------------------------------------------- ----- --------- ---------
Operating income 79,007 57,182
-------------------------------------------- ----- --------- ---------
Net impairment loss on financial assets (11,926) (7,502)
Operating expenses (51,345) (40,155)
-------------------------------------------- ----- --------- ---------
Profit before income tax 15,736 9,525
Income tax expense (3,038) (2,862)
-------------------------------------------- ----- --------- ---------
Profit for the period 12,698 6,663
-------------------------------------------- ----- --------- ---------
Revaluation reserve
- Amount transferred to profit and loss - (2)
Cash flow hedging reserve
- Effective portion of changes in fair
value - 378
Other comprehensive income for the period,
net of income tax - 376
-------------------------------------------- ----- --------- ---------
Total comprehensive income for the period 12,698 7,039
-------------------------------------------- ----- --------- ---------
Profit attributable to:
Equity holders of the Company 6,507 3,873
Non-controlling interests 6,191 2,790
-------------------------------------------- ----- --------- ---------
12,698 6,663
-------------------------------------------- ----- --------- ---------
Total comprehensive income attributable
to:
Equity holders of the Company 6,507 4,249
Non-controlling interests 6,191 2,790
-------------------------------------------- ----- --------- ---------
12,698 7,039
-------------------------------------------- ----- --------- ---------
Earnings per share for profit attributable
to the equity holders of the Company
during the period
(expressed in pence per share):
- basic 3 42.6 25.3
- diluted 3 42.4 25.3
Consolidated Statement of Financial Position
At 30 June
2015 2014
GBP000 GBP000
ASSETS
Cash 224,678 172,402
Loans and advances to banks 35,865 98,474
Debt securities held-to-maturity 98,143 49,980
Derivative financial instruments 1,634 101
Loans and advances to customers 1,436,381 841,602
Other assets 17,269 18,573
Financial investments 1,108 1,622
Deferred tax asset 1,770 3,080
Investment in associate 943 943
Intangible assets 11,100 12,235
Property, plant and equipment 13,475 5,617
---------------------------------------- ---------- ----------
Total assets 1,842,366 1,204,629
---------------------------------------- ---------- ----------
EQUITY AND LIABILITIES
Equity attributable to owners of the
parent
Share capital 153 153
Retained earnings 118,822 69,739
Other reserves (1,263) (1,091)
---------------------------------------- ---------- ----------
Non-controlling interests 61,716 20,777
---------------------------------------- ---------- ----------
Total equity 179,428 89,578
---------------------------------------- ---------- ----------
LIABILITIES
Deposits from banks 10,871 1,619
Deposits from customers 1,604,929 1,065,678
Current tax liability 5,487 1,145
Other liabilities 31,256 33,123
Deferred tax liability - 1,720
Debt securities in issue 10,395 11,766
---------------------------------------- ---------- ----------
Total liabilities 1,662,938 1,115,051
---------------------------------------- ---------- ----------
Total equity and liabilities 1,842,366 1,204,629
---------------------------------------- ---------- ----------
Consolidated Statement of Changes in Equity
Attributable to equity holders
of the Group
-----------------------------------------------------------------------------------------
Cash
Capital flow
Share Revaluation redemption Available-for-sale hedging Treasury Retained Non-controlling
capital reserve reserve reserve reserve shares earnings interests Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- -------- ------------ ----------- ------------------- -------- --------- ---------- ---------------- --------
Balance at 1
January
2015 153 98 20 (250) - (1,131) 114,641 60,038 173,569
Total
comprehensive
income for the
period
Profit for the
six
months ended
30 June
2015 - - - - - - 6,507 6,191 12,698
Other
comprehensive
income, net of
income
tax
Revaluation
reserve
Cash flow
hedging
reserve
Total
comprehensive
income for
the period - - - - - - 6,507 6,191 12,698
--------------- -------- ------------ ----------- ------------------- -------- --------- ---------- ---------------- --------
Transactions
with owners,
recorded
directly in
equity
Contributions
by and
distributions
to owners
Equity settled
share
based payment
transactions - - - - - - 56 36 92
Final dividend
relating
to 2014 - - - - - - (2,382) (4,549) (6,931)
Total
contributions
by and
distributions
to owners - - - - - - (2,326) (4,513) (6,839)
--------------- -------- ------------ ----------- ------------------- -------- --------- ---------- ---------------- --------
Balance at 30
June
2015 153 98 20 (250) - (1,131) 118,822 61,716 179,428
--------------- -------- ------------ ----------- ------------------- -------- --------- ---------- ---------------- --------
Attributable to equity holders
of the Group
-----------------------------------------------------------------------------------------
Cash
Capital flow
Share Revaluation redemption Available-for-sale hedging Treasury Retained Non-controlling
capital reserve reserve reserve reserve shares earnings interests Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- -------- ------------ ----------- ------------------- -------- --------- ---------- ---------------- --------
Balance at 1
January
2014 153 191 20 (169) (378) (1,131) 67,901 20,327 86,914
Total
comprehensive
income for the
period
Profit for the
six
months ended
30 June
2014 - - - - - - 3,873 2,790 6,663
Other
comprehensive
income, net of
income
tax
Cash flow
hedging
reserve
- Adjustment - (2) - - - - 2 - -
- Effective
portion
of changes
in fair
value - - - - 378 - - - 378
--------------- -------- ------------ ----------- ------------------- -------- --------- ---------- ---------------- --------
Total other
comprehensive
income - (2) - - 378 - 2 - 378
--------------- -------- ------------ ----------- ------------------- -------- --------- ---------- ---------------- --------
Total
comprehensive
income for
the period - (2) - - 378 - 3,875 2,790 7,041
--------------- -------- ------------ ----------- ------------------- -------- --------- ---------- ---------------- --------
Transactions
with owners,
recorded
directly in
equity
Contributions
by and
distributions
to owners
Equity settled
share
based payment
transactions - - - - - - 196 86 282
Final dividend
relating
to 2013 - - - - - - (2,233) (2,426) (4,659)
Total
contributions
by and
distributions
to owners - - - - - - (2,037) (2,340) (4,377)
--------------- -------- ------------ ----------- ------------------- -------- --------- ---------- ---------------- --------
Balance at 30
June
2014 153 189 20 (169) - (1,131) 69,739 20,777 89,578
--------------- -------- ------------ ----------- ------------------- -------- --------- ---------- ---------------- --------
Consolidated Statement of Cash Flows
Six Six
months months
ended ended
30 June 30 June
2015 2014
GBP000 GBP000
------------------------------------------------- ---------- ----------
Cash flows from operating activities
Interest received 73,555 53,775
Interest paid (12,512) (11,240)
Fees and commissions received 11,482 16,117
Cash payments to employees and suppliers (49,020) (54,804)
Taxation paid (1,163) (3,144)
--------------------------------------------------- ---------- ----------
Cash flows from operating profits before
changes in operating assets and liabilities 22,342 704
Changes in operating assets and liabilities:
- net decrease in derivative financial
instruments 6 36
- net increase in loans and advances
to customers (283,097) (100,072)
- net increase in other assets (403) (1,306)
- net decrease in deposits from banks (16,786) (384)
- net increase in amounts due to customers 410,644 107,887
- net (decrease)/increase in other liabilities (3,728) 2,106
--------------------------------------------------- ---------- ----------
Net cash inflow from operating activities 128,978 8,971
--------------------------------------------------- ---------- ----------
Cash flows from investing activities
Purchase of financial investments (1,580) -
Disposal of financial investments 1,602 -
Purchase of computer software (1,200) (765)
Purchase of property, plant and equipment (1,648) (306)
Proceeds from sale of property, plant
and equipment - 42
Purchases of debt securities (152,243) (37,766)
Proceeds from redemption of debt securities 145,783 7,252
--------------------------------------------------- ---------- ----------
Net cash outflow from investing activities (9,286) (31,543)
--------------------------------------------------- ---------- ----------
Cash flows from financing activities
Dividends paid (6,931) (4,659)
--------------------------------------------------- ---------- ----------
Net cash used in financing activities (6,931) (4,659)
--------------------------------------------------- ---------- ----------
Net increase/(decrease) in cash and cash
equivalents 112,761 (27,231)
Cash and cash equivalents at 1 January 147,782 298,107
--------------------------------------------------- ---------- ----------
Cash and cash equivalents at 30 June 260,543 270,876
--------------------------------------------------- ---------- ----------
1. Operating segments
The Group is organised into three main operating segments as
disclosed below:
1) Retail banking - incorporating household cash management,
personal lending and banking and insurance services.
2) UK Private banking - incorporating private banking and wealth
management.
3) Group Centre - ABG Group Centre management.
Transactions between the operating segments are on normal
commercial terms. Centrally incurred expenses are charged to
operating segments on an appropriate pro-rata basis. Segment assets
and liabilities comprise operating assets and liabilities, being
the majority of the balance sheet.
Retail UK Private Group
banking banking Centre Total
Six months ended 30 June 2015 GBP000 GBP000 GBP000 GBP000
--------------------------------- ---------- ----------- ------------ ----------
Interest revenue 64,162 13,460 60 77,682
Inter-segment revenue (159) (89) (60) (308)
--------------------------------- ---------- ----------- ------------ ----------
Interest revenue from external
customers 64,003 13,371 - 77,374
--------------------------------- ---------- ----------- ------------ ----------
Fee and commission income 9,482 6,891 - 16,373
--------------------------------- ---------- ----------- ------------ ----------
Revenue from external customers 73,485 20,262 - 93,747
--------------------------------- ---------- ----------- ------------ ----------
Interest expense (9,769) (3,162) 172 (12,759)
Subordinated loan note interest - - (166) (166)
Fee and commission expense (1,635) (180) - (1,815)
Add back inter-segment revenue 159 89 (248) -
--------------------------------- ---------- ----------- ------------ ----------
Segment operating income 62,240 17,009 (242) 79,007
--------------------------------- ---------- ----------- ------------ ----------
Impairment losses (11,218) (708) - (11,926)
Operating expenses (34,873) (12,640) (3,832) (51,345)
Segment profit / (loss) before
tax 16,149 3,661 (4,074) 15,736
--------------------------------- ---------- ----------- ------------ ----------
Income tax (expense) / income (3,132) - 94 (3,038)
--------------------------------- ---------- ----------- ------------ ----------
Segment profit / (loss) after
tax 13,017 3,661 (3,980) 12,698
--------------------------------- ---------- ----------- ------------ ----------
Loans and advances to customers 852,291 584,090 - 1,436,381
Other assets 149,701 281,135 (24,851) 405,985
--------------------------------- ---------- ----------- ------------ ----------
Segment total assets 1,001,992 865,225 (24,851) 1,842,366
--------------------------------- ---------- ----------- ------------ ----------
Customer deposits 835,083 769,846 - 1,604,929
Other liabilities 38,555 52,495 (33,041) 58,009
--------------------------------- ---------- ----------- ------------ ----------
Segment total liabilities 873,638 822,341 (33,041) 1,662,938
--------------------------------- ---------- ----------- ------------ ----------
Other segment items:
Capital expenditure (1,435) (1,313) - (2,748)
Depreciation and amortisation (799) (587) (5) (1,391)
--------------------------------- ---------- ----------- ------------ ----------
The "Group Centre" segment above includes the parent entity and
all intercompany eliminations. Segment profit is shown prior to any
intra-group eliminations. The UK private bank opened a branch in
Dubai in 2013, which generated GBP807k (2014: GBP225k) fee income
and had operating costs of GBP873k (2014: GBP745k). Other than the
Dubai branch, all other operations of the Group are conducted
wholly within the United Kingdom and therefore geographical
information is not presented.
Retail UK Private Group
banking banking Centre Total
Six months ended 30 June 2014 GBP000 GBP000 GBP000 GBP000
--------------------------------- --------- ----------- --------- ----------
Interest revenue 41,576 9,454 58 51,088
Inter-segment revenue (31) (87) (61) (179)
--------------------------------- --------- ----------- --------- ----------
Interest revenue from external
customers 41,545 9,367 (3) 50,909
--------------------------------- --------- ----------- --------- ----------
Fee and commission income 11,227 7,013 - 18,240
--------------------------------- --------- ----------- --------- ----------
Revenue from external customers 52,772 16,380 (3) 69,149
--------------------------------- --------- ----------- --------- ----------
Interest expense (7,213) (2,460) 29 (9,644)
Subordinated loan note interest - - (200) (200)
Fee and commission expense (1,825) (298) - (2,123)
Add back inter-segment revenue 31 87 (118) -
--------------------------------- --------- ----------- --------- ----------
Segment operating income 43,765 13,709 (292) 57,182
--------------------------------- --------- ----------- --------- ----------
Impairment losses (6,352) (1,150) - (7,502)
Operating expenses (25,899) (10,822) (3,434) (40,155)
Segment profit / (loss) before
tax 11,514 1,737 (3,726) 9,525
--------------------------------- --------- ----------- --------- ----------
Income tax (expense) / income (3,057) (88) 283 (2,862)
--------------------------------- --------- ----------- --------- ----------
Segment profit / (loss) after
tax 8,457 1,649 (3,443) 6,663
--------------------------------- --------- ----------- --------- ----------
Loans and advances to customers 447,848 393,754 - 841,602
Other assets 122,576 290,903 (50,452) 363,027
--------------------------------- --------- ----------- --------- ----------
Segment total assets 570,424 684,657 (50,452) 1,204,629
--------------------------------- --------- ----------- --------- ----------
Customer deposits 476,783 588,895 - 1,065,678
Other liabilities 30,209 65,752 (46,588) 49,373
--------------------------------- --------- ----------- --------- ----------
Segment total liabilities 506,992 654,647 (46,588) 1,115,051
--------------------------------- --------- ----------- --------- ----------
Other segment items:
Capital expenditure (625) (445) (1) (1,071)
Depreciation and amortisation (1,488) (308) (6) (1,802)
--------------------------------- --------- ----------- --------- ----------
2. Underlying profit reconciliation
The profit before tax as reported in the operating segments can
be reconciled to the underlying profit for the year as disclosed in
the tables below.
Arbuthnot Secure Arbuthnot
Latham Trust Banking
Underlying profit reconciliation & Co. Bank Group
Six months ended 30 June 2015 GBP000 GBP000 GBP000
----------------------------------- ---------- ------- ----------
Profit before tax 3,661 16,149 15,736
ELL & V12 fair value amortisation - 950 950
STB acquisition costs - 4 4
STB share options - 271 271
AL transformation project 170 - 170
----------------------------------- ---------- ------- ----------
Underlying profit 3,831 17,374 17,131
----------------------------------- ---------- ------- ----------
Basic earnings per share (pence) 46.8
Arbuthnot Secure Arbuthnot
Latham Trust Banking
Underlying profit reconciliation & Co. Bank Group
Six months ended 30 June 2014 GBP000 GBP000 GBP000
----------------------------------- ---------- ------- ----------
Profit before tax 1,737 11,514 9,525
ELL & V12 fair value amortisation - 2,767 2,767
STB acquisition costs - 183 183
STB share options - 754 754
----------------------------------- ---------- ------- ----------
Underlying profit 1,737 15,218 13,229
----------------------------------- ---------- ------- ----------
Basic earnings per share (pence) 38.1
3. Earnings per ordinary share
Basic
Earnings per ordinary share are calculated on the net basis by
dividing the profit attributable to equity holders of the Company
of GBP6,607,000 (H1 2014: GBP3,873,000) by the weighted average
number of ordinary shares 15,279,322 (H1 2014: 15,279,322) in issue
during the year.
Diluted
Diluted earnings per ordinary share are calculated on the net
basis by dividing the profit attributable to equity holders of the
Company of GBP6,607,000 (H1 2014: GBP3,873,000) by the weighted
average number of ordinary shares 15,279,322 (H1 2014: 15,279,322)
in issue during the year, as noted above, as well as the number of
dilutive share options in issue during the year. The number of
dilutive shares in issue at the half year was 53,699 (H1 2014:
42,533), being based on the number of options granted of 200,000
(H1 2014: 200,000), the weighted exercise price of 994 pence (H1
2014: 994 pence) per option and the average share price during the
year of 1359 pence (H1 2014: 1300 pence).
4. Basis of reporting
The interim financial statements have been prepared on the basis
of accounting policies set out in the Group's 2014 statutory
accounts as amended by standards and interpretations effective
during 2015 and in accordance with IAS 34 "Interim Financial
Reporting" (except for the comparatives in the statement of
financial position). The directors do not consider the fair value
of the assets and liabilities presented in these financial
statements to be materially different from their carrying
value.
The statements were approved by the Board of Directors on 20
July 2015 and are unaudited. The interim financial statements will
be posted to shareholders and copies may be obtained from The
Company Secretary, Arbuthnot Banking Group PLC, Arbuthnot House, 7
Wilson Street, London EC2M 2SN.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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